United States District Court, E.D. Virginia, Richmond Division
MEMORANDUM OPINION (GRANTING DEFENDANT'S MOTION
FOR SUMMARY JUDGMENT)
E. Hudson United States District Judge
GRM Management, LLC, and SN Holdings, LLC, (collectively
"GRM") brought suit against The Cincinnati
Insurance Company ("Cincinnati") for breach of a
business insurance policy ("the Policy") issued by
Cincinnati. GRM alleges that Cincinnati breached the terms of
the Policy by failing to issue a timely coverage decision
after GRM notified Cincinnati of a theft loss caused by
Donald Moore ("Moore"), GRM's former
matter is before the Court on Cincinnati's Motion for
Summary Judgment (ECF No. 22), filed on February 28, 2017.
Both parties have submitted memoranda and exhibits in support
of their respective positions. The Court heard oral arguments
on April 4, 2017.
reasons discussed herein, the Court will grant
Cincinnati's Motion. Consequently, this case will be
dismissed with prejudice.
owns and operates the Grand Magnuson Hotel and Conference
Center, a seven-story hotel in Richmond, Virginia. (Pis.'
Mem. Opp'n 1, ECF No. 29.) GRM acquired two insurance
policies for the hotel, each from a different insurer and
covering different risks. The first was an all-risk
commercial property insurance policy from Great American
Insurance Company ("Great American").
(Id.) The Great American policy excluded coverage
for theft by employees or any person to whom GRM entrusted
the insured property. (Id.) Additionally, GRM
purchased the Policy in dispute from Cincinnati, which covers
up to $100, 000 in losses "resulting directly from
'theft' committed by an 'employee'...."
(Notice of Removal Ex. 1 at 84 [hereinafter
"Policy"], ECF No. 1-1.)
Policy defines the term "employee" as "[(1)]
any natural person in [GRM's] service ...; [(2)] who
[GRM] compensates directly ...; [(3)] and [w]ho [GRM] has the
right to direct and control while performing services
...." (Id. at 94.) The Policy also sets out the
duties of the insureds in the event of loss, which state in
pertinent part that GRM "must" notify Cincinnati of
any loss "as soon as possible" and submit "a
detailed, sworn proof of loss within 120 days."
(Id. at 88.) Further, the Policy states that GRM may
not bring an action against Cincinnati "unless [GRM]
ha[s] complied with all the terms" of the Policy.
(Id. at 89.)
hired Moore pursuant to a "sub-contractor"
agreement signed on July 31, 2013. (Def.'s Mem. Supp. Ex.
2, ECF No. 23-2.) The agreement specifies that GRM hired
Moore to perform "casual labor and maintenance services
... to be delivered per project." (Id.) GRM
disclaimed any responsibility or liability "on behalf of
the Sub-Contractor. Conversely, the Sub-Contractor assume[ed]
all liabilities and [agreed to] . indemnify] [GRM] without
restrictions whatsoever from whomsoever." (Id.)
GRM agreed to pay Moore "no more than $1500" per
project on a biweekly basis and provided Moore with a hotel
room for a limited time at a rate of $60 per night.
(Id.) Moore was responsible "for meeting all
regulatory obligations, taxes, [and] insurance" incurred
while providing services to GRM. (Id.) The agreement
further states that "[i]n no way or form does this
agreement form an employer-employee relationship."
undisputed that GRM suffered a loss in September 2013,
resulting directly from a theft committed by Moore while
providing services to GRM. (Pis.' Mem. Opp'n 2;
Compl. ¶¶ 15-19, ECF No. 1-1.) The loss involves
personal property and various materials, including copper and
aluminum from rooftop HVAC units. (Comp. ¶ 19.) Moore
pleaded guilty to criminal charges related to the property
theft underlying GRM's insurance claim. (Id.
notified both insurers of the loss in September 2013. On
October 14, 2013, Anil "Neal" Patel
("Patel"), the hotel's general manager and
GRM's sole member, spoke with David Crews
("Crews"), a field claims superintendent with
Cincinnati. (Crews Aff. 1, ECF No. 23-1.) Patel informed
Crews that Moore, "a subcontracted employee, "
committed the theft but that GRM would file a claim with
Great American. (Id.; Pis.' Mem. Opp'n 5.)
Cincinnati closed GRM's file and took no further action
at that time. (Crews Aff. 1.)
meantime, GRM filed a claim with Great American for the loss.
(See Pis.' Mem. Opp. 2.) Great American disputed
coverage and filed suit for declaratory judgment. (Id;
see Great Am. Ins. Co. v. GRMMgmt, No. 3:14-cv-295 (E.D.
Va. filed Apr. 24, 2014).) Great American argued that Moore
was an employee of GRM or, alternatively, that GRM entrusted
the insured property to Moore, thus excluding the loss from
coverage under the Great American policy. (Complaint
¶¶ 83, 87, Great Am. Ins. Co. v. GRMMgmt,
No. 3:14-cv-295 (ECF No.l).) GRM filed a counterclaim for
breach of contract, based predominantly on the assertion that
Moore was an independent contractor, rather than an employee.
(Counterclaim, Great Am. Ins. Co. v. GRMMgmt, No.
3:14-cv-295 (ECF No. 10).)
the Great American litigation Patel provided ample testimony
regarding GRM's operations. Initially, Mike Bohlen, a
claims adjuster for Great American, conducted a videotaped
interview with Patel. (Pis.' Mem. Opp'n Ex. B
[hereinafter "Patel Interview Video"], ECF No.
29-2.) In the interview, Patel discussed GRM's general
personnel practices and the conditions surrounding the
September 2013 loss. (See generally Id. at mins.
11-15, 49-55.) Patel stated that after GRM purchased and
began operating the hotel, GRM kept two maintenance employees
who were hired by the previous owners. (Id. at mins.
11-12.) Subsequently, GRM fired those two maintenance
employees and hired additional maintenance workers "as
subcontractors because it was hard to ... manage these
maintenance folks. Unless you gave them an explicit list of
what needs to be done on a daily basis, they would sit around
twiddling their thumbs." (Id. at mins. 13-14.)
also submitted to an Examination Under Oath
("EUO"), taken on November 20, 2013. (Patel EUO;
ECF No. 23-4 to 23-7.) Patel discussed Moore's employment
relationship with GRM at length. (Id.) Patel
expressed his preference for hiring maintenance personnel as
independent contractors, rather than payroll employees,
"to limit [his] liability from a compensation
perspective." (Patel EUO 3, ECF No. 23-6.) Patel
repeatedly characterized Moore as an independent contractor
who was "responsible for [his] own taxes, insurance,
[and] liability." (Id.) Patel stated that
nobody at the hotel supervised Moore, and that Patel required
only that Moore complete his assigned tasks. (Id. at
6.) Patel stated that Moore did not have a weekly
hour-requirement but worked on a job-by-job basis to prevent
the relationship from looking like "employment."
(Id. at 5.) When given a task, Moore had to
"use [his own] resources" to complete it, he could
conduct his work remotely when possible, and he was allowed
to complete the assignment on his own schedule.
(Id.) Moreover, Patel allowed Moore to maintain
other employment provided that he completed any projects
assigned by GRM. (Id.)
American deposed Moore as well. (Moore Dep., ECF No. 29-1.)
Moore stated that GRM expected him to work "a 50-hour
work week" and that Patel constantly assigned him new
tasks. (Moore Dep. 28, 33-34.) Further, Moore stated that GRM
"held [him] as an employee" and that he was the
only person in charge of maintenance for the hotel.
(Id. at 7, 34.) While working for GRM, Moore was
only reachable via his personal cell phone, had to use his
own tools, had to use his personal contacts to ...